AUDITOR GENERAL'S REPORT On the Micro, Small & Medium Enterprises (MSMEs) For the period May 3, 2017 to June 30, 2018 December, 2018 Yusador S. Gaye, CPA, CGMA Auditor General, RL Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 Table of Contents Opinion ................................................................................................................................... 3 Basis for Opinion...................................................................................................................... 3 Management Responsibility for the Financial Statements ............................................................. 3 Auditor’s Responsibility ............................................................................................................. 4 Statements of Receipts and Payments for the period ended June 30, 2018 ................................... 5 STATEMENT OF FUND BALANCE AND CASH STATUS FOR THE PERIOD ENDED June 30, 2018 ....... 6 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNT .............................................. 7 STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2018 ...................................................... 8 NOTES TO THE FINANCIAL STATEMENTS .................................................................................. 9 PROJECT DESIGNATED ACCOUNT STATEMENT ........................................................................ 12 1 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 Acronyms Acronyms/Abbreviations/Symbol Meaning AG Auditor General APA Assistant Project Accountant BP Basis Period BRS Bank Reconciliation Statements CBL Central Bank of Liberia CGMA Chartered Global Management Accountant CPA Certified Public Accountant DSA Daily sustenance allowance FIs Financial Institutions FS Financial Statements GAC General Auditing Commission GL General Ledger International Organization of Supreme Audit INTOSAI Institutions IPSAS International Public Sector Auditing Standards ISSIAs International Standards of Supreme Audit Institutions IT Information Technology LBDI Liberia Bank for Development & Investment MFDP Ministry of Finance & Development Planning ML Management Letter MSMEs Micro, Small & Medium Enterprises OFM Operational Financial Manual PFM Public Financial Management PFMU Project Financial Management Unit POP Project Operational Period ToR Terms of Reference TTL Technical Team Leader 2 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 Hon. Samuel D.Tweah, Jr Minister Ministry of Finance Development & Planning Broad and Mechlin Streets Republic of Liberia December 31, 2018 Dear Hon. Tweah: RE: AUDITOR GENERAL’S REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OF THE MICRO, SMALL & MEDIUM ENTERPRISES. Opinion We have audited the accompanying financial statements of the Micro, Small & Medium Enterprises (MSMEs) for the period May 3, 2017 to June 30, 2018 financed by World Bank Grant No. TF A2356 for the fiscal period ended June 30, 2018, which comprise the statements of Receipts and Payments, Comparison of Budget and Actual Amounts and a Summary of significant Accounting Policies and other explanatory information. In our opinion, the accompanying financial statements (Grant No. TF A2356) present fairly, in all material respects, the Statement of Receipts and Payments as at June 30,2018, Statement of Comparison of Budget and Actual Amounts and a summary of other accounting policies and explanatory notes for the fiscal period then ended in accordance with International Public Sector Accounting Standards (IPSAS) Cash Basis of Accounting. Basis for Opinion We conducted our audit in accordance with International Standards for Supreme Audit Institutions. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements Section of our report. We are independent of the entity in accordance with the Code of Ethics for Supreme Audit Institutions together with the ethical requirements that are relevant to our audit of the financial statements in accordance with the World Bank guideline and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Management Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IPSAS Cash Basis, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 3 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 In preparing the financial statements, management is responsible for assessing its ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to cease operations, or has no realistic alternative but to do so. The MSME Management is responsible for overseeing the Project’s financial reporting process. Auditor’s Responsibility Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISSAIs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Monrovia, Liberia December 2018 4 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 MSME Rural Finance Post Ebola Reconstruction Project (MSME) Statements of Receipts and Payments for the period ended June 30, 2018 RECEIPT/PAYMENTS CONTROLED BY ENTITY Account 2018 In United States Dollars NOTES June US$ Receipt IDA Grant 4 4,132,153 Total Receipt 4,132,153 Payment SME Financing Facility part 1a 5 3,998,288 Consultancy, Training, Over Cost Part 1b, 2 and 3 6 26,015 Total Payments 4,024,303 Excess of receipts over payments (payment over receipt) 107,851 Funds Balance as at beginning - Cumulative Fund balance 107,851 The notes on pages 7-11 are integral part of these financial statements 5 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 STATEMENT OF FUND BALANCE AND CASH STATUS FOR THE PERIOD ENDED June 30, 2018 2018 In United States Dollars Notes June US$ A. Fund Balance Balance of Project Fund Add: total receipt during the period 4,132,153 Total fund available for operations 4,132,153 Less total payment during the period 4,024,303 Balance of project fund at the end of the year 107,851 B. Cash Status: Cash at Bank 107,851 Total cash on hand and in bank 107,851 Difference between A and B The notes on pages 7 to 11 are integral part of these project financial reports 6 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNT FOR THE MSME FOR THE PERIOD ENDED JUNE 30, 2018 ACTIVITY WITH IN PROJECT ANNUAL YEAR TO VARIANCE Percentage COMPONENTS ALLOCATION BUDGET DATE OF EXPENDITURE VARIANCE Uses of Funds By Activity Within US$ US$ US$ US$ % Components SME Financing Facility 4,000,000 4,000,000 3,998,288 1,713 0.04 Part 1a Consultancy, Training , 800,000 800,000 26,015 773,985 96.80 Over Cost Part 1b, 2 and 3 Grand Total 4,800,000 4,800,000 4,024,303 775,698 26.02 The notes on pages 7 to 11 are integral part of this project financial report 7 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements of World Bank Funded Project For the year ended June 30, 2018 MSME: Grant No. TF A2356 STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2018 2018 In United States Dollar Note June Assets Cash and Cash Equivalent 107,851 Total Assets 107,851 Fund Balance Grant 107,851 Accumulated Fund Balance 107,851 The notes on pages 7 to 11 are integral part of these project financial reports Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 NOTES TO THE FINANCIAL STATEMENTS 1. Background and information of the project With support from the World Bank Trust Fund; the Liberia MSME and Rural Finance post Ebola Reconstruction project is to support the development of a framework to provide MSMEs finance on sustainable terms, enhance the capacity of local private sector financial institutions to lend profitably to MSMEs and objectively measure outcomes in the Republic of Liberia. The MSME project was approved by the World Bank on June 2, 2016 with a grant amount of USD 4,800,000.00 Million. The aim of the project is i. To support on-lending to micro and small entrepreneurs a. To develop use of digital financial services and new learning instruments b. To establish a process of for tracking disbursements of funds from this project and other financial intermediation activities to determine objectives and monitor achievements ( employment, poverty and gender targeting, as well as financial performance 2. Uses of Grant Proceeds The table below sets out the categories of items to be financed out of the grant proceeds, the allocation of the amounts of the grant to each category and the percentage of expenditures for items to be finance in each category. Amount of grant % of expenditure Allocated expressed in to be financed US$ Category SME Finance Facility part 1a 4,000,000 100 Consultancy, Training, Over Cost part 1b, 2&3 800,000 100 Total 4,800,000 All categories of expenditure shown in these financial statements are fully financed based on the percentage below: % of Expenditure TF grant 100 Total 100 9 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 3 Significant Accounting Policies Basis of Accounting The financial statements have been prepared in accordance with the Cash Basis International Public Sector Accounting Standards (IPSAS) and in the manner required by the Project Grant Agreement as required by the World Bank’s operating Policies and Procedures and PFMU’s Financial Management manual. This implies that all expenditures are expensed whether they are revenue of capital in nature and income of recognized when funds are received form the World Bank. Reporting currency Financial reports have been presented in United States Dollars. Transactions denominated in other currencies are translated into United States Dollars and recorded at the rate of exchange ruling at the dare of transactions. Balance denominated in other currencies are translated into United States Dollars at the rate of exchange prevailing on the reporting date. Currency exchange Interests being paid by MFIs in local currencies (LRD) on loans given them are converted at the prevailing rate at the time of repayment of each installment. (The prevailing exchange rate used to convert LRD to USD is quoted at 150.00 LRD to 1 USD). Notes to the Financial Statements 2018 In United States Dollars June 4. Grant Grant from LSSNP is held in a deferred income account when received and are only recognize in the Project’s income statement when utilized. Grant Receipt MFDP/MSME/001/-TF A2356 100,000 MFDP/MSME/003/-TF A2356 600,000 MFDP/MSME/004/-TF A2356 325,000 MFDP/MSME/005/-TF A2356 50,000 MFDP/MSME/006/-TF A2356 1,500.000 MFDP/MSME/007/-TF A2356 750,000 MFDP/MSME/008/-TF A2356 150,000 MFDP/MSME/009/-TF A2356 150,000 MFDP/MSME/011/-TF A2356 35,198 MFDP/MSME/012/-TF A2356 105,545 MFDP/MSME/013/-TF A2356 105,545 MFDP/MSME/014/-TF A2356 227,000 4,098,288 10 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 4.1 Interest Received on loans from BFIs & MFIs GN Bank Liberia Limited 6,000 BRAC Liberia 3,250 Afriland First Bank 7,525 Liberia Bank for Development & Investment (LBDI) 15,000 Business Link Inc 250 Diaconia 593 Foundation for Women 1,248 33,866 Total Receipts 4,132,153 5. SME Financing Facility part 1a 3,998,288 3,998,288 6. Consultancy, Training, Over Cost Part 1b, 2 and 3 26,015 26,015 Note to the Financial Statements 2018 In United States Dollars June 7. Cash receipt through grant and other Sources IDA grant 4,098,288 Interest receipts on loan from BFIs and MFIs 33,866 4,132,153 8. Cash paid SME Financing Facility part 1a 3,998,288 Consultancy, Training, Over Cost part 1b, 2 and 3 26,015 Total Payments 4,024,303 11. Variance Analysis PROJECT ANNUAL YEAR TO DATE ACTIVITY WITH IN COMPONENTS ALLOCATION BUDGET EXPENDITURE VARIANCE Uses of Funds By Activity Within Components US$ US$ US$ US$ SME Financing Facility Part 1a 4,000,000 4,000,000 3,998,288 1,713 4,000,000 4,000,000 3,998,288 1,713 Consultancy, Training , Over Cost Part 1b, 2 and 3 800,000 800,000 26,015 773,985 800,000 800,000 26,015 773,985 Grand Total 4,800,000 4,800,000 4,024,303 775,698 11 Promoting Accountability of Public Resources Auditor General's Report on the Audit of the MSME Rural Finance Post Ebola Reconciliation Project Financial Statements (Grant No. TF A2356) For the fiscal period ended June 30, 2018 Note: Budget variances are as a result of the project not recruiting the relevant project staff and capacity building proposal are yet to be approved by the project Task Team Leader (TTL). PROJECT DESIGNATED ACCOUNT STATEMENT Account Number: 1602003086 Account Type: Current Account Depository Bank: Central Bank of Liberia Address: Monrovia, Liberia Currency: United States Dollars In United States Dollars 2018 June Total Grant Received 4,132,153 Total grant income reported 4,132,153 Amount spent 4,024,303 Balance as at beginning - Balance as at June 30, 2018 107,851 Closing Balance Consist of: 02/205/300002/01 (Central Bank of Liberia) 72,810 Interest on loan from BFIs & MFIs 33,866 Petty Cash 1,175 107,851 12 Promoting Accountability of Public Resources